Correlation Between Xtra Energy and Green Leaf

Can any of the company-specific risk be diversified away by investing in both Xtra Energy and Green Leaf at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Xtra Energy and Green Leaf into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xtra Energy Corp and Green Leaf Innovations, you can compare the effects of market volatilities on Xtra Energy and Green Leaf and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Xtra Energy with a short position of Green Leaf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtra Energy and Green Leaf.

Diversification Opportunities for Xtra Energy and Green Leaf

0.22

Correlation Coefficient

Xtra Energy  Green Leaf

Modest diversification

The 3 months correlation between Xtra and Green is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Xtra Energy Corp and Green Leaf Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Leaf Innovations and Xtra Energy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Xtra Energy Corp are associated (or correlated) with Green Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Leaf Innovations has no effect on the direction of Xtra Energy i.e., Xtra Energy and Green Leaf go up and down completely randomly.

Pair Corralation between Xtra Energy and Green Leaf

Given the investment horizon of 90 days Xtra Energy Corp is expected to under-perform the Green Leaf. But the pink sheet apears to be less risky and, when comparing its historical volatility, Xtra Energy Corp is 4.36 times less risky than Green Leaf. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Green Leaf Innovations is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Green Leaf Innovations on December 4, 2024 and sell it today you would lose (0.01) from holding Green Leaf Innovations or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Xtra Energy Corp  vs.  Green Leaf Innovations

Xtra Energy Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xtra Energy Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Xtra Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Green Leaf Innovations

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Green Leaf Innovations are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, Green Leaf reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtra Energy and Green Leaf

The main advantage of trading using opposite Xtra Energy and Green Leaf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtra Energy position performs unexpectedly, Green Leaf can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Green Leaf will offset losses from the drop in Green Leaf's long position.

The idea behind Xtra Energy Corp and Green Leaf Innovations pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.